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Sunday, 17 April 2011

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Highest economic growth in 32 years

Sri Lanka last year registered its second highest economic growth since independence and the highest in 32 years, according to the 2010 Central Bank of Sri Lanka (CBSL) Annual Report. The CBSL report released on New Year's Eve was indeed a welcome sign and an indication that the country is marching triumphantly towards further economic prosperity.

Based on the impressive economic indicators achieved during the past few years, Sri Lanka could well consolidate its position to become the 'Wonder of Asia' sooner than later. Moreover, the New Year will help bring about a renewal in spirit and fresh expectations.

The Sinhalese and the Tamils all over the country are still in an exuberant mood enjoying the New Year festivities as never before. The peaceful atmosphere to enjoy the New Year in its true spirit sans any fear and security concerns was made possible only after the country achieved its true freedom after the Security Forces freed the country from the clutches of LTTE terror in May 2009.

With the successful economic growth and the people getting about freely for the New Year celebrations, we recall the immense sacrifices made by the Security Forces in vanquishing the LTTE terrorists.

The Sinhala and Hindu New Year has brought satisfaction and joy to the vast majority of Sri Lankans for centuries. Be it a Sinhalese or a Tamil, the New Year festival pays homage to the Sun for the strength given to the land and people and it is also the annual harvest festival that echoes the achievements of the people living in far-flung areas.

President Mahinda Rajapaksa in his New Year message elaborated that the traditions associated with the festival have come down through centuries to the joy of celebration.

"It is the duty of parents and adults to treasure this joy for future generations by making their children aware of its importance in their way of life," he said.

The best news that the country received for the New Year was its booming economy which began to flourish after terrorism was eradicated.

It is heartening to see the country's economy recording an impressive growth of eight percent, the highest annual rate of growth reported since 1978. This remarkable achievement reflects a fast recovery and a move towards a high and sustainable growth path. According to the 2010 Central Bank report released last week, all key sectors of the economy reflected a commendable performance last year, underpinned by the peaceful domestic environment, improved investor confidence, favourable macro- economic conditions and a gradual recovery of the global economy from one of the deepest recessions in recorded history.

Another significant factor is that inflation which continues to remain low at around mid-single digit levels and the benign outlook for inflation enabled the Central Bank to ease its monetary policy stance further in 2010. An encouraging improvement in the overall fiscal situation was witnessed in 2010 with the recovery in Government revenue supported by the expansion of economic activity, addressing certain persistent structural issues in the tax system and the containment of recurrent expenditure.

According to the CBSL report, the overall deficit was reduced to 7.9 percent of GDP in 2010 from 9.9 percent in 2009. The external sector, which made a remarkable turnaround since the second quarter of 2009, continued to improve in 2010. Exports and imports recovered strongly, with higher earnings coming from the thriving tourism industry and higher inward remittances offset the widening trade deficit to a great extent, reducing the external current account deficit.

In addition, increased capital and financial flows resulted in the balance of payments (BOP) recording a surplus in 2010, further strengthening the country's external reserves. With the favourable macro-economic conditions, the recovery in economic activity and the supportive regulatory and supervisory framework, the performance and stability of the financial sector strengthened during the corresponding period.

It is a matter of pride that the Government has achieved the anticipated positive growth in the agricultural sector as the improved performance in all other key sectors of the economy too contributed towards the high economic growth in 2010. The contribution of the country's agricultural sector which amounted to 11.9 percent of the GDP in 2010, grew by seven percent, compared to 3.2 percent in 2009. This was driven mainly by the increased production of paddy, tea, rubber and minor export crops along with significant improvements in the fisheries sector output. The impressive growth in the agricultural sector is expected to increase further in a highly positive manner.

The industrial sector, supported by increased domestic and external demand with enhanced investor and consumer confidence, has shown a growth rate of 8.4 percent and the conducive peaceful environment which prevails in the country could influence this trend to increase further. Industries such as food and beverages, rubber-based products, textiles and garments coupled with increased performance in the construction sector and increased hydro power generation were the main contributory factors.

The share of the industry sector in the total GDP increased marginally to 28.7 percent in 2010. The production industry, which contributed 54.6 percent to the total industry output, recorded a 7.5 percent growth during the corresponding period.

Domestic savings and national savings increased, from 17.9 percent of the GDP and 23.7 percent of the GDP in 2009, to 18.7 percent and 24.7 percent. Private investment recovered from 17.9 percent of the GDP in 2009 to 21.6 percent in 2010, while public investment declined marginally from 6.6 percent of the GDP in 2009 to 6.2 percent in 2010, and consequently the total investment as a percentage of the GDP in 2010 increased to 27.8 percent.

All these superlative achievements have been made possible due to the right economic policies implemented under the Mahinda Chinthana. Political stooges who expressed reservations on the President's ability to manage the economy in 2005 had to eat humble pie eventually.

President Rajapaksa has laid the foundation to take Sri Lanka towards new economic horizons. It is abundantly clear that Sri Lanka could achieve double digit economic growth if the right economic policies introduced under the Mahinda Chinthana are maintained under the President's illustrious leadership.

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